The dynamic effect of corporate financial hedging on firm value : the case of Indian MNCs

Jyoti Prakash Das, Shailendra Kumar

This paper explores the effect of financial instruments for exchange rate hedging on a firm's value in the presence of non-operating profit or loss from foreign exchange transactions. This study uses Tobin's Q ratio as a proxy for firm value and a two-step generalized method of moments (GMM) model to estimate the effect of financial hedging. Our dynamic panel analysis using extensive data on 61 Indian multinational corporations (MNCs) in 2009-2020 shows that financial hedging instruments, such as foreign currency derivatives (FCD) and foreign currency-denominated debt (FDD), enhance firm value by 16.91% and 10.21%, respectively. The results of the robustness test confirm the findings.

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Year of publication:	2023
Authors:	Das, Jyoti Prakash ; Kumar, Shailendra
Published in:	Borsa Istanbul Review. - Amsterdam [u.a.] : Elsevier, ISSN 2214-8450, ZDB-ID 2745445-9. - Vol. 23.2023, 3, p. 696-708
Subject:	FCD \| FDD \| Financial hedging \| Firm value \| FXPROFIT \| Hedging \| Unternehmenswert \| Multinationales Unternehmen \| Transnational corporation \| Indien \| India \| Kapitalstruktur \| Capital structure \| Unternehmensbewertung \| Firm valuation

Type of publication:	Article
Type of publication (narrower categories):	Aufsatz in Zeitschrift ; Article in journal
Language:	English
Other identifiers:	10.1016/j.bir.2023.01.010 [DOI]
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://ebvufind01.dmz1.zbw.eu/10014308833